If a company has significant economies of scale in the long run - assuming a large market -- the company will tend to:
A) grow larger and have a declining average cost curve.
B) become smaller and have a declining average cost curve.
C) grow larger and have raising average cost curve.
D) become smaller and have a rising average cost curve.

Question

Quizplus · Accepted Answer

When a company has significant economies of scale in the long run and operates in a large market, it will be able to reduce its average costs per unit as it expands its production, due to the spreading of fixed costs over a larger output. As a result, the company can achieve a declining average cost curve, which means that the more it produces, the lower its average costs become. Therefore, the company is likely to grow larger over time and benefit from economies of scale, while maintaining or improving its profitability.

If a Company Has Significant Economies of Scale in the Long